Aims. The aim of this study was to evaluate the cost-effectiveness of arthroscopic partial meniscectomy versus physical therapy plus optional delayed arthroscopic partial meniscectomy in young patients aged under 45 years with traumatic meniscal tears. Methods. We conducted a multicentre, open-labelled, randomized controlled trial in patients aged 18 to 45 years, with a recent onset, traumatic, MRI-verified, isolated meniscal tear without knee osteoarthritis. Patients were randomized to arthroscopic partial meniscectomy or standardized physical therapy with an optional delayed arthroscopic partial meniscectomy after three months of follow-up. We performed a cost-utility analysis on the randomization groups to compare both treatments over a 24-month follow-up period. Cost utility was calculated as incremental costs per quality-adjusted life year (QALY) gained of arthroscopic partial meniscectomy compared to physical therapy. Calculations were performed from a healthcare system perspective and a societal perspective. Results. A total of 100 patients were included: 49 were randomized to arthroscopic partial meniscectomy and 51 to physical therapy. In the physical therapy group, 21 patients (41%) received delayed arthroscopic partial meniscectomy during follow-up. Over 24 months, patients in the arthroscopic partial meniscectomy group had a mean 0.005 QALYs lower quality of life (95% confidence interval -0.13 to 0.14). The cost-utility ratio was €-160,000/QALY from the healthcare perspective and €-223,372/QALY from the societal perspective, indicating that arthroscopic partial meniscectomy incurs additional costs without any added health benefit. Conclusion. Arthroscopic partial meniscectomy is arthroscopic partial meniscectomy is unlikely to be cost-effective in treating young patients with isolated traumatic meniscal tears compared to physical therapy as a primary health intervention. Arthroscopic partial meniscectomy leads to a similar quality of life, but higher costs, compared to physical therapy plus optional delayed arthroscopic partial meniscectomy. Cite this article: Bone Joint J 2023;105-B(11):1177–1183